Today: Intel (INTC) manages slightly stronger-than-expected profits, but its plans and projections for 2013 spook investors and send stock down after-hours. Also: Wall Street gains as S&P 500 closes at a new five-year high, while Silicon Valley stocks move higher.
Intel beats earnings expectations, but projections concern investors
Intel's earnings exceeded Wall Street's low expectations Thursday, but its projections for the current quarter came in lower than expected and the company said it plans to spend freely on capital expenditures in 2013, when it faces a CEO transition and possible further degradation of the personal-computer market
Intel reported profits of $2.5 billion, or 48 cents a share, on revenues of $13.5 billion in the fourth quarter of 2012, beating analyst expectations of 45 cents a share on profit and meeting projections on revenue. However, those numbers reflect a 3 percent year-over-year decrease in revenues, the second consecutive quarter in which Intel has fallen behind its previous performance.
The Santa Clara company's decline was even more stark in its yearly returns: Profit fell 15 percent from 2011 to $11 billion, while its annual revenue of $53.3 billion was down about 1 percent from the previous year.
CEO Paul Otellini cheered the numbers, saying in the company's release, "The fourth quarter played out largely as expected as we continued to execute through a challenging environment."
That environment could be even more challenging in 2013, as Otellini will step down in May ahead of schedule, and Intel is considering hiring a CEO from outside of the company for the first time in its history. The challenges Intel faced in 2012 aren't going anywhere either, as the chipmaker attempts to push into mobile devices much later than competitors, such as Qualcomm, while hoping that tablet-laptop hybrids it labels Ultrabooks can spark a comeback for PCs.
Intel's first attempt to outline an unclear 2013 did not go over well with analysts and investors, as its projected revenues for the current quarter had a midpoint of $12.7 billion, less than the consensus estimate of $12.9 billion; and the company said it expects to spend $13 billion on capital expenses in 2013, blowing away Bloomberg's average analyst projection of that figure, $10 billion.
MKM Partners analyst Daniel Berenbaum called the company's capital expenditure figure "a gigantic number," while RBC Capital analyst Doug Freedman told Reuters, "This is a company that is continuing to spend money to participate in the market. That may concern some investors."
Investors showed concerns in after-hours trading. Intel shares received a huge spike late in dying minutes of the session after the earnings report was sent slightly early, pushing the stock 2.6 percent higher on the solid profits reported. Once investors received a full look at the report, however, they sent shares down more than 5 percent in late trading.
S&P hits new five-year high as stocks gain on good economic news
The Standard & Poor's 500 reached a new five-year high Thursday, as strong economic indicators pushed all three major stock indexes higher by 0.6 percent apiece.
Two economic reports from the federal government released Thursday morning helped the positive movement: The weekly check on unemployment applications returned the lowest number in five years, while the monthly report on housing construction showed builders began work on homes and apartments in 2012 at a rate unseen since 2008.
"The economy is entering the year maybe not with a running start, but certainly a head start," Jack Ablin, chief investment officer of BMO Private Bank, told Bloomberg News. "It helps build a nice story for 2013." The S&P 500 surpassed five-year highs it originally achieved earlier this month, and is just 5.2 percent below its all-time high. The Dow Jones struck a five-year high during the session, but fell below that mark before the close.
Apple stock evens out, eBay gets boost after earnings
Tech stocks also had a positive day, with the tech-heavy Nasdaq matching the S&P and Dow on its daily advance and the SV150 index of Silicon Valley's largest technology companies gaining slightly less, at 0.3 percent.
Apple (AAPL) had a quiet day compared to the large swings of the previous three sessions, losing 0.7 percent but staying above $500 a share. Facebook fought back above $30 a share with a 1 percent gain as Instagram finally answered doubts about its active users by claiming 90 million monthly active users and saying those numbers have actually increased since the kerfuffle over new terms of service.
EBay (EBAY) gained 2.4 percent the day after it announced stellar quarterly and yearly earnings, while San Jose platform company Xilinx gained slightly both before and after releasing earnings that beat projections on profit but not revenues.
Cisco (CSCO) fell 0.4 percent as JPMorgan analysts downgraded the stock on fears the San Jose networking company is not going to be able to compete with other companies more advanced in software-defined networking. The same report credited Sunnyvale rival Juniper Networks with making a bigger thrust into that category, and upgraded the company; Juniper gained 1.4 percent on the day.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 18.46, or 0.59 percent, to 3,136
The blue chip Dow Jones industrial average: Up 84.79, or 0.63 percent, to 13,596.02
And the widely watched Standard & Poor's 500 index: Up 8.31, or 0.56 percent, to 1,480.94
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.